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CFPB to Increase Use of Advisory Opinions as Rulemaking Alternative

The Consumer Financial Protection Bureau (CFPB) has increased the use of “soft tools,” including advisory opinions and blog posts, to complement its rulemaking authority in recent months. These tools are used more as advocacy means rather than enforcement means and are easier for the agency to use. In two months, from early May to early July, the CFPB has issued five advisory opinions. 

One instrument, however, that the CFPB has been using more frequently to regulate some areas in the consumer finance space is advisory opinions. Advisory opinions are used to interpret the law and issued under CFPB’s authority. Advisory opinions are interpretive rules and exempt from the notice-and-comment rulemaking requirement of the Administrative Act. Instead of going through the lengthy rulemaking process, the agency can issue a new interpretation of the rule and begin applying it with immediate effect. 

On July 7th, an opinion was issued that outlined certain obligations of consumer reporting agencies and consumer report users under section 604 of the Fair Credit Reporting Act. The opinion affirms that a consumer reporting agency may not provide a consumer report to a user under FRCA section 604(a)(3) unless there is reason to believe that all of the consumer report information that is included pertains to the consumer who is the subject of the user’s request. 

On June 29th, the CFPB interpreted the language in Section 808 of the Fair Debt Collection Practices Act by issuing an opinion that warned debt collectors that most pay-to-pay fees that they often charge violate federal law.

On June 28th, the agency reminded states of their right, with few exceptions, to issue their own fair credit reporting laws that protect residents. The opinion stated that state laws are not preempted by federal law unless they conflict with each other. 

On May 19th, an interpretative rule was issued seeking to strengthen the states’ enforcement actions to protect consumers from financial fraud, scams, and other wrongdoings. 

On May 9th, the CFPB issued an advisory opinion to affirm that banks and other lenders need to follow fair lending laws, not only during the application process but when canceling loans or changing terms. 

The CFPB Director stated that the agency is moving away from highly complicated rules and moving towards an increase in advisory opinions and interpretations of existing law. This way, interpretative rules are delivered to the industry quickly.

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